New Workers’ Compensation Law Delivers Results In Its First Year

John J. Flanagan

March 13, 2007

Senator John Flanagan (2nd Senate district) today heralded the news from the New York State Insurance Department regarding the positive impact of this year’s historic reform of Worker’s Compensation Law. The new law aims to increase the benefits for injured workers and reduce the cost of doing business in New York State and this week’s announcement that the rates for workers’ compensation insurance will decline by more than 20.5% to save New York businesses about $1 billion in the 2007-2008 fiscal year clearly demonstrates its initial success.

Based on a careful analysis of the impact of the reforms and market trends, New York State Insurance Superintendent Eric Dinallo has ordered the 20.5% decline in workers’ compensation insurance rates for the fiscal year beginning July 15.

In March, when the Governor and legislative leaders announced the historic agreement on this reform, the Governor projected the result would be a rate decline of 10% to 15%.

"This is great news for the financial well-being of New York businesses and of our state as a whole. By reducing the costs associated with this important workplace protection while increasing the benefits that injured workers are able to access, this new law will help make New York a preferred destination for businesses both big and small," said Senator Flanagan. "I applaud all who were involved in making this law a reality and am proud to have played a role in fundamentally changing the ability of our business community to operate."

"We promised that we would reduce the cost of workers’ compensation as part of our effort to make New York more business friendly," said Governor Spitzer. "I am proud to say that the reforms we instituted have already produced the biggest single year decline in workers’ compensation rates since at least 1975, the first year for which data is currently available. That amounts to even more cost savings for employers than we expected, while increasing the weekly benefits for injured workers. I thank Superintendent Dinallo, the Legislature, the business community and the unions for their continued cooperation that has led to this result."

President and CEO of the Business Council Kenneth Adams said: "This is welcome news and the business community remains grateful to Governor Spitzer and the legislative leaders for their continuing efforts to drive down the costs of workers’ compensation. This process was begun earlier this year with the reform deal, and this news and continuing efforts to achieve administrative reforms show that we are on a good track."

Superintendent of Insurance Eric Dinallo said: "Workers’ compensation reform is working. The Insurance Department was assigned to implement the reforms, and we are succeeding. Last month, we produced an accelerated system for resolving disputed cases by the June 1st deadline. Today, we are announcing substantially lower rates. In the months ahead, we will continue working with the business community, labor and the insurance companies to make New York’s workers’ compensation system the best in the nation, improving equity while lowering employer costs. We believe that the rate reduction is fair, that the private carriers will remain profitable, and that the market will continue to be competitive."

Senator Flanagan noted that benefits for injured workers had not increased in more than a decade and that New York employers currently pay some of the highest workers’ compensation premiums in the nation. These newly enacted insurance reforms are estimated to save businesses over $1 billion and increase the ability of our businesses to compete.

The new law also includes provisions to implement vigorous anti-fraud measures against businesses and workers.

Highlights of the Workers’ Compensation Reform Law include:

-Increasing the maximum weekly benefit for injured workers from $400 to $500 in the first year, $550 in the second year, $600 in the third year, and to two-thirds of the average weekly wage in New York in the fourth year. Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be indexed annually.

-Increasing the minimum weekly benefit from $40 to $100.

-Reducing employer costs for workers’ compensation insurance premiums by 10-15%, an estimated savings of nearly $1 billion.

-Initiating strong anti-fraud measures including the ability to stop work on a job site where a company has failed to purchase workers’ compensation insurance for its workers, and higher criminal penalties for violators.

-Closing the Second Injury Fund, initially set up to help injured World War II veterans, due to its high employer costs and costly loopholes.

In addition to the reforms addressed in the legislation, a legislative Task Force will work with the Superintendent of Insurance, the Department of Labor and Workers’ Compensation Board to pursue additional reforms and make recommendations about additional legislation.